Celebrity money manager Cathie Wood, chief executive of Ark Investment Management, has said that this year’s drop in the “disruptive” technology stocks she owns represents a buying opportunity.
And she put her money where her mouth is Thursday, with Ark Innovation ETF (ARKK) buying 66,190 shares of Tesla (TSLA), worth $13.7 million as of Thursday’s close.
Tesla dropped 7% Thursday amid concern about its earnings outlook, and has slumped 41% year to date. The electric vehicle titan is the second biggest holding of Wood’s flagship Ark Innovation ETF.
She’s apparently isn’t as optimistic about semiconductor giant Nvidia (NVDA). Ark Innovation dumped 59,252 shares Thursday, worth $7.2 million.
Many experts anticipate the chip industry will continue to weaken, as demand sags and the U.S. government restricted semiconductor exports to China.
Five-Year Track Record
Ark funds have tumbled this year, as their technology stock holdings suffered from weak earnings. Wood has defended herself by noting that she has a five-year investment horizon.
And the five-year track record of Ark Innovation ETF ARKK could indeed give investors comfort up to May 9. The fund’s five-year return beat that of the S&P 500 until then. But the five-year annualized return of Ark Innovation totaled only 1.78% through Oct. 20, far behind the S&P 500’s 9.24% return.
The fund’s performance also falls far short of Wood’s goal for annualized returns of 15% over five-year periods.
Ark Innovation’s share price has tumbled 64% so far this year, and is down 78% from its February 2021 peak.
The $7 billion fund’s underperformance may finally be starting to push investors away. Ark Innovation has suffered a net outflow of $371 million in the month through Oct. 19, according to VettaFi, an ETF research firm. But it has still registered an inflow of $704 million over the last six months.
Investor Loyalty
You might wonder why so many investors have stuck with Wood, despite her mediocre returns. The fact that she had one spectacular year certainly helps. Ark Innovation ETF skyrocketed 153% in 2020.
Also, Wood has become something of a rock star in the investment world, appearing frequently in the media. She is clearly intelligent and articulate, explaining financial concepts in ways that novice investors can understand.
Still, Wood has drawn detractors. On March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.
“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.
Wood countered Greengold’s points in an interview with Magnifi Media by Tifin. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said.
If Wood’s investment performance rebounds, her true believers will say, “I told you so.” If it doesn’t, it will be interesting to see how long investors are willing to stick with her.
